I know it is still too early to discuss given that the House and Senate might need to reconcile the two versions (Read: How do laws become laws) however it is not bad to give you an idea of what is in store for us. So here is our short (but extensive) series on CREATE BILL which will tackle the big changes and salient features of the CREATE BILL as per Senate Bill (SB) 1357.
Part 1 – Lowered Corporate Income Tax Rates (Sec. 6 amending Sec. 27 (A) of the National Internal Revenue Code (NIRC) of 1997)
Our country has the most expensive/largest corporate income tax rate compared with its South East Asian neighbor with 30% income tax on taxable income which is above and beyond the average corporate income tax rate in the region of 20-25% while Singapore boasts the cheapest tax rate with 17%.
Now the Senate version of the CREATE BILL wishes to address this concern by amending the Corporate Tax Rate as follows:
Domestic Corporations (DCs)
These are corporations duly incorporated under Philippine Laws. These corporations are currently taxed at 30%. But when the CREATE Bill is enacted the corporate income tax rate will be reduced to 25% beginning JULY 2020 (yes ,it will have a retroactive effect).
In addition, Corporations who are qualified to be considered as Micro – Small Medium Enterprises (MSME) or those entities with assets whose values are not more than Php 100 million (excluding the land where the particular business entity’s office, plant and equipment are situated) AND at the same time not having a taxable income more than Php 5M will have a reduced corporate income tax rate of 20%.
Foreign Corporations
These are corporations duly incorporated under Foreign Laws. While for foreign corporations the tax corporate income tax rate will be reduced to 25%.
To summarize:
Type of Corporation
Current
Proposed (SB 1357)
Domestic Corporation
30%
Assets not over Php 100M AND Taxable Income not over Php 5M – 20% Taxable income over Php 5M (regardless of value of assets) – 25%
Foreign Corporations
30%
25%
We will be coming out with a podcast/youtube video discussing this article in the coming weeks.
Want to know more about CREATE BILL? and the possible changes it may bring. Just stay tuned by liking our Facebook page :
You might have heard of it, may even have applied for it but what is it really and how does it work?
What is Barangay Micro Business Enterprise (BMBE)?
A BMBE is defined as any business enterprise engaged in production, processing, or manufacturing of products, including agro-processing, as well as trading and services, with total assets of not more than P3 million. Such assets shall include those arising from loans but not the land on which the plant and equipment are located.
What incentives can you get when you are registered as a BMBE?
Income tax exemption from income arising from the operations of the enterprise;
Please take note that what it only exempts is a tax on INCOME and therefore does not include other taxes such as Other Percentage Taxes or Value Added Taxes (which are based on sales and/or collections), withholding taxes on compensation, expanded withholding taxes, documentary stamp taxes (if applicable to your business) -Check your BIR Form 2303
Also please take note for individual taxpayers (those registered as sole proprietors) once you chose to be registered to be a BMBE entity you CANNOT avail of the 8% flat tax rate.
Exemption from the coverage of the Minimum Wage Law (BMBE employees will still receive the same social security and health care benefits as other employees);
Priority to a special credit window set up specifically for the financing requirements of BMBEs; and
Technology transfer, production and management training, and marketing assistance programs for BMBE beneficiaries.
The LGUs are also encouraged to either reduce the amount of local taxes, fees, and charges imposed or exempt the BMBEs from local taxes, fees, and charges.
Who again are qualified for the above incentives?
Any business entity hence be it:
Sole proprietorship (those business registered with the Department of Trade and Industry or DTI);
Corporations and/or partnerships(those registered with Securities and Exchange Commission or SEC) and
Cooperative (those registered with Cooperative Development Authority)
EXCEPT licensed professionals (those rendered by anyone, who is duly licensed by the government after having passed government licensure examination, in connection with the exercise of one’s profession e.g., Accountant, Lawyer, Doctor, etc.).
The above business entity must NOT HAVE MORE THAN Php 3 million in ASSETS. Such assets shall include those arising from loans but not the land on which the plant and equipment are located.
Once an entity has been given a BMBE Certificate, is the exemption from income tax automatic?
No. The entity in order to avail of the exemption from income tax MUST:
The person or its duly authorized representative must go to the Revenue District Office where the business is located.
Fill up BIR Form 1905 -Update and Correction
Present a copy of the BMBE Certificate
Surrender the original Certificate of Registration – BIR Form 2303 (if one has already been issued).
Await the release of an updated where it expressly indicates that the taxpayer has availed of the income tax exemption
Note the tax type “INCOME TAX” shall not be deleted since the BMBE registered shall still be required to file an income tax return however will have a zero tax due.
Is the exemption from the minimum wage law automatic?
Yes, once a BMBE Certificate has been issued to the entity the exemption to the minimum wage law automatic.
Am I still required to file Income Tax Returns even after I have registered my BMBE Certificate with the BIR?
Yes or else you will be facing penalties for open cases.
Is the exemption from the minimum wage law retrospective?
No. The rule is that laws shall have prospective application only. Thus, an enterprise’s exemption from the coverage of the minimum wage law can only be applied to employees hired after its registration as a BMBE.
Kidding aside, business owners or even anyone who handles the household’s finance should be well aware about the bills coming their way.
But we should not worry ,the government, service providers, banks and credit card companies made sure that you bills would not pile all on you at the same time. Here, we summarize the extensions on payment made to your monthly dues:
Rent:
Basis: Department of Trade and Industry Memorandum Circular 20 -12
Extension provided: 30 day grace period for rent due falling within the ECQ period without incurring interest, penalties or other charges due to late payment. Where the 30 calendar days (including Saturdays and Sundays) grace period will be counted from the last date due of the rent which fell due within the ECQ period.
For example: You have a rent due that was due to be paid on May 5 at an amount of Php 10,000. You will have 30 days grace period or until June 4, 2020 to pay the rent without interest, penalties or other charges.
While cumulative rents falling due within the ECQ period will be amortized for 6 months which would added to your current rent due for the month.
For example: You had a rent due last March 25 and April 25 for 15,000 each. How much will you pay in May 25, June 25 and so on?
Your payment for rent from May 25 to December 25, 2020 shall be as follows:
Who could avail: Residential unit tenants and Commercial Space tenant who are leased by Micro, Small or Medium enterprises (these are your duly registered entities with assets less than Php 100,000,000) – MSMEs
Other concessions available to MSMEs:
Total or partial waiver of lease payments which fell due during the ECQ period
Grant of reprieve or discount amount
Renegotiation of lease term agreements
Use of other recourse to mitigate impact of ECQ to the MSMEs
How could the extension be availed: Commercial tenants shall signify to their lessors their request for assistance thru grace period or amortization of rent by providing documents such as but not limited to financial statements, unused invoices or receipts and lease contract for proof of tenancy. The lessor shall evaluate base on the liquidity and capability to pay of the MSMEs to repay rent.
No eviction :For failure to pay the rent for residential or commercial rent due may be enforced within the 30 day period AFTER the lifting of the ECQ.
Penal Clause: Lessors who shall refuse to provide the 30 day grace period to lessees shall be penalized with:
Fine of not less than Php 10,000 or
Imprisonment of not less than 2 months or
Both.
The full text of the MC 20-12 can be downloaded here:
The Energy Regulatory Commission’s directed all distribution utilities and retail electricity suppliers to provide a grace period to its customers through deferment of their electricity bill falling due within the ECQ period or from March 16 to April 30, 2020.
Meralco quickly complied with the above directive,by adding such guideline in their FAQ during COVID 19
Manila Water on their website has earlier announced the extension of payment due date for thirty (30) days in consideration to the economic impact of the enhanced community quarantine (ECQ) to its customers. While the ECQ also necessitated the suspension of actual meter reading, water bills are currently derived from the average actual consumption for the past three (3) months prior to the implementation of the ECQ.
It also launched a SMS bill inquiry system. See poster below:
While Maynilad has this on their website, where they advised customers that their billing would be on the average water consumption over the past three months however no announcement as to payment extension.
The Securities Exchange Commission (SEC) in their latest Notice posted last April 29,2020 directed all covered institutions to provide a 30 day grace period for all loans with principal and/or interest falling due within the extended period ECQ period , March 17 – May 15, 2020 pursuant to Section 3.01 of the Implementing Rules and Regulations (IRR) of Section 4(aa) of Bayanihan to Heal As One Act.
Under the IRR the term “covered institutions” shall mean all lenders, including but not limited to:
Banks;
Quasi – bank;
Non – stock savings and loan associations;
Credit card issuers;
Pawnshops; and
Other credit granting financial institutions under BSP, SEC and CDA including GSIS, SSS and Pag -Ibig Fund
The accrued interest meanwhile may be paid by the borrower on staggered basis over the remaining life of the loan.
While the term “loans” under Section 4 (aa) of the Bayanihan Heal As One Act (RA 11469) shall include but not limited to the following:
Salary;
Personal;
Housing;
Motor vehicle loans; and
Credit card payments
You may download the the Tagalog FAQ regarding the SEC Notice for the Mandatory Grace Period on Loan here:
As per their website, the Payment Extension Period is the 30-day/1-month extension period from your due date. If your due date is on March 16, 2020, your payment extension period would be from March 16, 2020 to April 30, 2020. Your new due date would be on May 1, 2020.
As per their website,Globe is giving all its mobile and broadband customers including business and enterprise clients nationwide an extra 30 days from the due date to settle their monthly bills.
For PHIC – Employers – Payment for contributions are extended until May 31
We hope we have informed you well on the due dates you have settle, with these dates in mind you can now draw out your cash flow budget that will help you manage your payments.
–Wania and Partners is a duly registered general professional partnership with services ranging from accounting, taxation, training and consultancy.
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As many of us are counting down the days until the lock down is lifted, let us not forget to take note of the fact that everything wouldn’t be as us they use to be.
Businesses that would be allowed to resume should do their part in making sure that guidelines are in place and strictly enforced to make sure that a second wave won’t occur.
But how should the guidelines look like? What should be in it? We have enumerated a few but important things to consider in crafting it:
Health & Safety is #1
The Department of Trade and Industry and Department of Labor and Employment has issued out an advisory mandating businesses to put in place minimum health guidelines to ensure to minimize the spread of COVID – 19.
Below are some of the important points of said issuance:
Maintain proper hygiene by washing of hands regularly. Sanitizing and disinfecting all common contact place such as door knobs, handles.
Maintain physical distancing at all times with a distance of no less than 1 meter radius from each other or limiting number of persons in an enclosed space.
Provide a measure for checking the temperature of every employee and/or visitors.
Accomplishment of health checklist form.
Work from Home arrangement is encouraged
Employers are enjoined to provide the following:
FREE medicines and vitamins
Provide adequate resources such as face masks, water, soap ,sanitizer, disinfectant, thermometers and COVID-19 test kits.
Designation of safety officers who will see to it physical distancing is enforced.
Provide possible ways of transportation to reduce the possibility of exposure during travel.
This will be the best time to call your accountants and HR person to check on the Company’s resources which includes :
Cash – make sure you have enough cash to operate for the first few weeks .
Inventory – inventory levels need to be checked what’s on hand so that your sales team would now what products needs to be pushed.
For those in the service business your inventory could be your long list of back logs with your clients. Call your clients and reassure them that you are on top of it
Receivables – time to make that phone call and check on people owing your business to augment your cash. Just be understanding also that your debtor might not pay your right away , if that is the case provide him/her a payment plan to settle the debt.
Employees – they might not show up in your in your balance sheet but they are your company’s asset. Check on their status and advise them of the possible resumption of work
Payables – all though not an asset it is better to check on this also. As their is a long list of payments that needs to be made, first on the list is Taxes (see our previous article on tax deadlines ).
Expect to operate at Minimum Capacity
Everything is not back to normal, expect major disruptions affecting your operations such as employees having a hard time getting a ride on their way to work, deliveries will still be hampered and work in the office would be minimized.
Put it in writing and Communicate
Take all these 3 factors into consideration and you may now prepare your guidelines. Remember to put it in writing and communicate to the people who will be affected by such policies.
Things would no longer be normal again for a very long time and we have to live under the “NEW NORMAL”. It will be hard but we have to be patient and obedient in order to bounce back from this.
Revenue Regulation (R.R.) 11 -2020. Extension on the statutory deadlines and timelines for the filing and submission of any document and payment of taxes pursuant to Section 4 (z) of Republic Act No. 111460 otherwise known as “Bayanihan to Heal As One Act”.
As we prepare to go back to what they say the “New NORMAL”, let us not forget to take note of the tax returns that we still have to file and pay (yes, even if you were not able to get any sort of relief).
Below are the summarized new deadlines of some of the tax returns mostly filed by taxpayers using the calendar period:
Applicability of extended deadline:
The extended deadline shall apply throughout the Philippines.
Deadline due on a holiday or non – working day:
The latter portion of the Section 2 provides that should any of the deadline falls on a holiday or non – working day, then the submission and/or filing contemplated shall be made on the next working day. The following dates fall on a non – working day:
May 30 – Saturday
June 12- Independence day
June 6-7 , 13-14, and 20 -21 (Saturdays and Sundays)
Provision for further extension:
Section 3 of R.R. 11 -2020 states that in case of any extension due to another quarantine extension Section 2 of R.R. 11 -2020 shall be allowed further extension of another fifteen (15) calendar days.
Penalties for non – filing and payment:
Be sure you to note of these deadline and allot money in paying your taxes as failure to file and pay shall mean a hefty penalty to be paid by your business which includes the following:
Additional surcharge of 25% and 12% interest on top of the basic tax due plus compromise penalties as prescribe in Revenue Memorandum Order 7-2015
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